Target first began doing same day delivery for their online orders back in 2017 when they partnered with a last-mile delivery company, Shipt, which is similar to that of Instacart. When Target first launched this program, customers had to pay a $99 a year fee in order to use the services through Shipt. That has since changed, and customers can use Shipt with or without an account and will pay a $9.99 delivery fee if they do not have a membership, and can also find items that are able to be delivered that day directly through the Target website. This model is something that Target has been investing in heavily for some time, and it has paid off for Target. Target is now able to fulfill 80% of all online orders using their physical store locations, rather than having to ship from warehouses, a feat that is 90% more cost effective for Target. This also translated into a 42% increase in Target’s digital business revenue in Q1 of 2019. This transformation of Target’s delivery model is also reshaping the way that they hire and set up their stores.
Target has been remodeling over 1,000 stores, in hopes of being able to provide customers with a better order pick-up experience than before. Target has also started shifting towards hiring employees in their stores that are more operational and fulfillment based, as they can help bridge this gap of e-commerce and same day delivery or pick up. They are providing these specialty employees with tools that give them the capacity to fulfill all orders by 95% within the first hour. This specialty hiring is also seen within how they are transitioning away from having general employees, and having employees specialize in one section of the store, whether it is beauty, technology, groceries, etc. Target’s investment in this strategy doesn’t stop their however, they have also increased their investment in their technological capabilities through Shipt, which has translated into a 10-15% increase in order values, and a customer repeat rate of 80% through Shipt. Target’s reshaping to this format was only accelerated due to the nature of the pandemic, and the influx of ecommerce that occurred for the first year of the pandemic, and I think these changes are going to stay and have a positive impact on Target’s business model long term.
Nolan Adams
Link to article: “ Target is Using its Stores for Same Day Delivery and Online Order Fulfillment” Modern Retail, June 2019: https://www.modernretail.co/retailers/targets-store-strategy-is-nowunderpinned-by-same-day-delivery-and-online-order-pickup/
